Charter Hall fund swaps industrial for convenience retail

Charter Hall’s $4.3 billion Retail REIT (CQR) has sold its stake in its only industrial asset and reinvested funds into a swag of New Zealand service stations.

The Coles-backed Edinburgh, Adelaide, distribution centre is trading to a Charter Hall managed industrial fund for c$148.3 million, reflecting a 4.25 per cent yield.

The vendor paid a Charter Hall partnership with three interests $111.8m in April, 2020.

Not long earlier, the manager reset the lease for 15 years, significantly boosting the capital value.

Given debt levels, CQR’s initial equity investment equated to c$60m.

It will reap $95.3m from the disposal.

The balance of the property is held by two Charter Hall Direct trusts.

Funds tipped into convenience retail

Charter Hall said it will use the windfall to acquire a 49pc stake in a portfolio of convenience retail investments leased to Ampol’s Z Energy Limited.

With 51 properties, the $120m off-market deal reflects a 5.5pc capitalisation rate.

The rental agreements are triple-net, meaning the occupier covers maintenance and upgrades (story continues below).

The bulk of the properties – 78pc – are in metropolitan areas.

The blended portfolio Weighted Average Lease Expiry is 15.3 years.

Settlement is scheduled in late October.

“We continue to actively curate the CQR portfolio to drive earnings growth for investors,” CQR chief executive officer, Ben Ellis, said.

“CQR’s investment in the Coles distribution centre has been highly successful,” he added.

“We’re now looking to take advantage of the strength in demand for industrial and logistics assets and to recycle these proceeds into an attractive NNN portfolio of Long WALE convenience assets with CPI exposure,” according to the executive.

“Following the settlement of these transactions, 37pc of major tenant rent reviews are CPI based and 33pc [are] NNN leases”

It will also control a stake in over 500 service stations investments including 23.3pc of an Australian portfolio leased to BP (and now worth $c$510.8m), and 24.5pc of a New Zealand portfolio ($188.6m).

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of